Equity Crowdfunding: First Resort or Last Resort?

Abstract

While research has focused on the factors that impact funding success on crowdfunding platforms, we lack a detailed understanding of the factors that drive firms to search for crowdfunding. Drawing on the pecking order theory, we argue that firms list on equity crowdfunding platforms as a last resort, that is, when they lack internal financing and debt capacity. Consistent with our hypotheses, we show that firms listed on equity crowdfunding platforms are more unprofitable, often have excessive debt levels and have more intangible assets, relative to their matches. We discuss the implications for theory and practice.

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